Tuesday, May 20, 2008

GEAR Number What?

Should We Giya for GEAR?

Nyiko Floyd Shivambu, 1 November 2007

In Tsonga/Shangaan, the word Giya means dance in celebration. The former ANC President Thabo Mbeki called on all ANC members and all South Africans to indulge in the published Statistics South Africa Community Survey 2007 , which essentially illustrated through reliable statistics that ‘Today is Better Than Yesterday”, (ANC Today, 26 October 2007). The President celebrates the Community Survey 2007 findings that the livelihoods of South Africans have significantly improved, with more recorded access to housing, electricity, cellular phones, computers, Internet etc. These improvements, the President attribute, amongst other things, to the intervention of the Growth, Redistribution and Redistribution (GEAR) macro-economic strategy, which the Left forces in and outside the alliance deplored as a neo-liberal structural adjustment programme, whilst maintained as a continuation of the Reconstruction and Development Programme in government. With the release of StatsSA’s Community Survey 2007 and the proclamation by the President that the recorded progress is “Thanks to GEAR”, the question we ask below is: Should we join the President and Giya for GEAR?

Thinking that there is now a common and shared understanding in the broader South African revolutionary alliance that the adoption of the Growth, Employment and Redistribution (GEAR) represented a strategic shift and a tactical mistake, the ANC President Thabo Mbeki’s “Today is Better than Yesterday” still argues that GEAR was correct and continuation of the Reconstruction and Development Programme (RDP). This is raised amidst a strong and worrying suspicion on the President’s side that the progressive Left forces in the tripartite alliance are out to get the ANC and displace it as the leader of the National Democratic Revolution. Well, even this supposition is odd; as the ANC’s historical and scientific observation has always been that the working class is the leader of the NDR, whilst the ANC leads the Alliance. The Mafikeng Strategy and Tactics (adopted by the 50th and 51st National Conferences) of the ANC for instance notes that “South African capitalism gave birth to a collective of black workers whose class position and social existence placed it at the head of the struggle for freedom… by dint of its activism and organisation, this class won the respect of all the other motive forces as the leader of the NDR” (S&T, 1997 & 2002).

The President is still not persuaded that GEAR represented a radical rightward shift from ANC’s historical economic transformation perspectives and this largely for reasons he outlines in “Today is better than Yesterday”. Avoiding the risk of joining those who harp stringed instruments and beat drums in celebration of South Africa’s socio-economic challenges, we should not be frightened to observe (leaving space for counter-persuasion) that GEAR was a shift from the predominant, shared and common perspective on what should constitute economic transformation in South Africa as articulated in the RDP. In almost all instances, ANC social and economic transformation perspectives are premised on the Freedom Charter’s objectives and as a progressive pragmatic intervention, the guiding principle and practice upon seizure of political power in the early to mid-1990s emphasised on redistribution and reconstruction as a basis for economic growth. Certainly, we should celebrate the betterment of people’s lives as illustrated by the StatsSA Community Survey 2007, but this should not blind us from identifying and deploring the strategic mistakes made with the adoption of GEAR.

To historically locate the shift of GEAR from previous ANC economic transformation perspectives, we should distinguish some frequent concepts in the democratic movement’s economic transformation language, mainly ‘ownership by people as a whole’ and ‘nationalisation’. This difference is understood in the basic concepts of socialised ownership (transfer to the ownership of the people as a whole) and nationalised ownership (State ownership) of production means, and the Freedom Charter envisioned the former. Now, the first distinct shift which was reflected in the mid to late 1980s was around the propositions of the ANC’s Discussion Document on Economic Policy (DDEP), which committed to nationalisation vis-à-vis socialisation of ownership of the key means of production. Indeed, the DDEP committed to nationalisation, and further recommended re-nationalisation on public utilities and nationalisation in cases where “the balance of evidence suggests that it would be advantageous” (DDEP, 1990).

In his first public address after the release of political prisoners in 1990, Nelson Mandela said, “nationalisation of the mines, banks and monopoly industries is ANC policy, and any change to this policy is inconceivable” (Nattrass, 1994). ANC policy, as guided by the Freedom Charter has not necessarily been nationalisation, but socialisation of the ownership of key production means, unless the State is positioned and generally accepted as the custodian of the people as a whole. The assertions of Nelson Mandela were possibly arising out of the reality that in the liberation movement, the concepts of nationalisation and socialisation of ownership (ownership by the people as a whole) are often used interchangeably. The DDEP further laid a firm basis for a growth through redistribution economic policy direction. This entailed that there is a firm commitment for “growth through redistribution in which redistribution acts a spur to growth and in which the fruits of growth are redistributed [in a sustainable and developmental cycle] to meet basic needs” (DDEP, 1990).

Post DDEP, economic transformation perspectives of the ANC were underpinned by the growth through redistribution commitment, underpinned by a relatively progressive commitment to prompt economic growth through redistribution of basic services to better the living conditions of majority of South Africans. This was strongly reflected and emphasised in the Ready to Govern, RDP and later the report of the Macroeconomic Research Group (MERG), commissioned by the ANC to explore and draft a possible macroeconomic strategy for a post apartheid South Africa. The RDP for instance illustrated that, “Growth, the measurable increase in the output of the modern industrial economy - is commonly seen as the priority that must precede development. Development is portrayed as a marginal effort of redistribution to areas of urban and rural poverty. In this view development is a deduction from growth. The RDP breaks decisively with this approach” (RDP, 2004: Clause 1.3.6).

The shift in economic transformation perspectives in the ANC began from the socialisation of ownership, to nationalisation, to growth through redistribution, and to redistribution through growth . The adoption of GEAR in 1996 heightened the latter aspect and was the most radical shift from the ANC historical economic perspective, and was in no way consistent with the Ready to Govern and RDP, as is supposed by the President’s “Today is Better than Yesterday” and in the ANC 2007 economic transformation discussion document. Whilst Ready to Govern and RDP committed to fiscal stability, they in no way propositioned that it should be the overriding principle, such that growth is no longer through redistribution, but redistribution through growth. This was a radical shift from the key and progressive economic transformation perspectives in the ANC, and it is unfortunate that GEAR was not sifted through robust discussions in the revolutionary alliance, but, reportedly, down-lifted as the grand economic intervention to reduce deficits and achieve fiscal stability.

The consistency from Ready to Govern and RDP to GEAR is justified through a clause in the two redistributive strategies, which committed to fiscal stability. Well, the RDP White Paper for instance stated verbatim that “the Government of National Unity draws on the following basic strategy to achieve its objectives: financial and monetary discipline in order to finance the RDP; reprioritisation of public sector activity; and facilitation of industrial restructuring” (RDP White Paper, 1994). Whilst fiscal stability was component of the RDP, it certainly was not an overriding principle, like it is in GEAR and economic planning post this macroeconomic strategy. Redistribution underpinned the RDP as an element to spur growth—whilst GEAR and, and to a greater extent ASGISA overly altered this strategic perspective to suppose that growth should be the only basis for redistribution. Perhaps the ideological elasticity of RDP White Paper accommodates GEAR, yet the principle foundation of RDP is no way similar to the practices of GEAR.

The 2007 ANC economic transformation discussion document makes an unsustainable and potentially apocalyptic assertion that “whilst the ANC had elaborated a clear strategic perspective on macro-economic policy, the details of our tactical positions were—correctly—left to those deployed in government, who had to respond to an evolving and complex environment” (ANC, 2007: paragraph 11). This is a subtle justification of an unsustainable phenomenon of government deployees altering strategic objectives and direction of the ANC in the name of tactical considerations. This reflects what the ANC Youth League identified in the 2007 Draft ANC Strategy and Tactics, that it “emphasises the role of government on the national democratic revolution as the main driver for change, and therefore misrepresent and undermine the centrality of the ANC as the leader of the NDR and the role of society at large in bringing social change”, (ANC YL, 2007).

Now GEAR, which according to the ANC Economic Transformation discussion document was correctly adopted by government deployees, overemphasises the centrality of fiscal stability in driving development, attracting investments and creating jobs. The fiscal stability and reduction of deficit is narrowly pursued through privatisation of State Owned Enterprises, under-sizing of the public service, commercialisation of the remaining SOEs, and outsourcing of what was understood as non-core functions in the public service. GEAR supposed that all these measures will attract investments, grow the economy, create jobs and reduce poverty. Instead of these hollow aspirations and expectations, GEAR led to loss of millions of jobs, and effectively deepened poverty, due to the reality that quality employment for majority of the people in South Africa is almost clinically linked to sustainable poverty reduction.

It is not a secret that whilst GEAR achieved some level of fiscal stability, it dismally failed to achieve its own strategic objectives—mainly economic growth levels, investments and creation of jobs. In 2001, the SACP Deputy General Secretary, Cde Jeremy Cronin observed, “While the fiscal restraint “fundamentals” have been overachieved, the flows of foreign direct investment (FDI) have been exceedingly disappointing, and growth has been sluggish, touching just over 3 percent in some years”, (Cronin, 2001). More disastrous, however, are the other socio-economic indicators. Overwhelming evidence shows that since 1994 the unemployed have increased in numbers; that the gap between those at the top and the bottom of society has widened; that impoverishment has increased; and that social problems have increased in scale, (Lagassick, 2006: 379).

The United Nations Development Programme (UNDP), recently observed that “at least between the years 1995 – 2000, for which there is adequate data—economic growth was associated with declining incomes across households at all income levels, but with the sharpest income declines occurring among the least well off” (Pollin et al, 2006: 17). In 2001, Cde Jeremy Cronin pointed to the fact that “Over one million workers have lost their jobs in the formal sector since 1994, whilst the inequality gap has widened to make South Africa one of the most unequal societies in world, together with Guatemala and Brazil”. Most severe out of this situation was the impoverishment of majority of the working class through retrenchments, as the rate of unemployment virtually doubled between 1995 and 2002. The official unemployment rate virtually doubled from 15.9% in 1995 to 30.5 % in 2002, while the expanded rate of unemployment rose from 29.4% in 1995 to 42.5% in 2002, (DBSA, 2005). The unemployment and thereof poverty problem is virtually chronic in South Africa, and worsened by the imposition of the GEAR, which prioriotised the fiscus over the needs of the majority of poor people. Instead of strictly reducing government’s deficit and achieving fiscal stability, GEAR also laid lots of jobs through retrenchments that resulted from commercialisation/privatisation of State-Owned Enterprises and under-sizing of the public service, which were until then, the most suitable providers of quality and sustainable employment.

Whilst we cannot celebrate the poverty and unemployment challenges that characterise the masses of our people, we should really discuss what constitutes the betterment of life in the post democratic dispensation; so that we can all climb on rooftops and proclaim that “Today is Better than Yesterday”. Notably, National Treasury is currently in a correct and long overdue discussion about South Africa’s poverty line, yet the currently government endorsed statistics point to the fact that more than 40% of South Africa’s population lives below the poverty line (less than R3000 per annum) , mainly due to lack of sustainable income. The question is whether with the plausible improvement the President noted in StatsSA Community Survey 2007 are worth celebrating in the background of the massive challenges of poverty and unemployment that characterise South African society.

In 2006, government introduced ASGISA as a set of interventions to economic growth constraints. If these constraints are addressed, ASGISA presupposed that government and society in large will be able to meet the social objectives. Consistent with GEAR’s neo-liberal ideological underpinning, ASGISA asserts,

“Government's investigations, supported by some independent research, indicate that the growth rate needed for us to achieve our social objectives is around 5% on average between 2004 and 2014. Realistically assessing the capabilities of the economy and the international environment, we have set a two-phase target. In the first phase, between 2005 and 2009, we seek an annual growth rate that averages 4,5% or higher. In the second phase, between 2010 and 2014, we seek an average growth rate of at least 6% of GDP. In addition to these growth rates, our social objectives require us to improve the environment and opportunities for more labour-absorbing economic activities. More broadly, we need to ensure that the fruits of growth are shared in such a way that poverty comes as close as possible to being eliminated, and that the severe inequalities that still plague our country are further reduced” (ASGISA, 2006).

These presuppositions directly contradict the underlying principles of the Ready to Govern and the RDP, and reflect an even deeper digression from the Freedom Charter principles of socialised ownership of the means of production. Now, the government investigations, supported by independent research essentially discovered that South African economy should first grow at rates around 5% between 2004 and 2014 in order of government to meet its social objectives (redistribute and reconstruct). ASGISA says that we need to ensure that the fruits of growth are shared, and this principally means that you grow the economy first and share the fruits later. To grow the economy, you should dedicate your energy towards reducing the cost of doing big business through getting your macro economics right, production of skills, opening of new potentially apocalyptic markets (bio-fuels), addressing government co-ordination, and various other useful interventions.

Now as early as 1998, the SACP had diagnosed the rightward shift in South Africa’s economic planning and perspectives, a phenomenon which is presently christened the “1996 Class Project”. In a 1998 assessment of South Africa’s democracy, the SACP noted:

“We believe that the budget deficit reduction targets are arbitrary, based as they are on macro-economic models derived from a largely unreconstructed Reserve Bank. GEAR embodies, in its core fiscal and monetary policies, a neo-liberal approach that is at variance with our reconstruction and development objectives. Much of GEAR, and indeed much of government's evolving economic policy has shifted progressively away from ANC economic policy in the first half of the 1990s, which underlined the interconnectedness of growth and development, which envisaged a major emphasis on growth led by domestic and regional infrastructural development. More and more, there has been a shift towards the assumptions of an export-led growth, based on the myth that deregulation and liberalisation, more or less on their own, will make the South African economy "globally competitive ".

Decrying the effects of GEAR in 1998, the SACP noted the “Lack of consistency in building a strong, developmental state - although the official policy of government and of the alliance is that the state should play an active and developmental role in the economy, in practice this strategic standpoint is often not pursued. "Privatisation" is still often proclaimed to be official government policy and an end in itself, notwithstanding the National Framework Accord on the Restructuring of State Assets. The transformation of the public sector is often reduced to a narrow cost-cutting, budget-deficit reduction exercise. And the role of the state in the economy often amounts to little more than pleas to the private sector ”.

Overall, the difference between GEAR and the RDP is premised on the observation that the RDP intended to pursue growth and development through reconstruction and redistribution, whilst GEAR essentially pursued growth in order to realise employment, redistribution and reconstruction. Now, in our celebration of the reality that statistics say the lives of our people have improved, we should not be blinded to believe that the GEAR formula to economic reconstruction is suitable—it is objectively not, and this is reflected in the levels of unemployment and widening wealth gap between the rich and the poor. We really cannot Giya for GEAR. Besides, we should treat reliable statistics consistently, even when they point to the levels of poverty and unemployment. An issue that perhaps requires a thorough investigation is: What were we capable of achieving in the first 13 years of democracy, which we did not achieve?

Nyiko Floyd Shivambu Young Communist League National Committee Member

REFERENCE LIST:

• ANC Department of Economic Policy: Discussion document on economic policy, September 1990.• African National Congress, Economic Transformation for a National Democratic Society, 52nd National Congress Discussion Document, February 2007. • African National Congress Youth League, ANC Youth League Response to the Strategy and Tactics, May 2007. • Cronin. J. Post-Apartheid South Africa: A Reply to John S. Saul, Monthly Review 52, no. 9, January 2001 • Development Bank of Southern Africa (DBSA), Development Report 2005: Overcoming development in South Africa’s second economy, 2005. • Lagassick, South African Political Economy, Centre for Civil Society, Colloquium on the Economy, Society and Nature, 2006. • Pollin, R. Epstein, G. Heintz, J. and Ndikumana, L. An Employment-Targeted Economic Program for South Africa, United Nations Development Programme (UNDP), New York, 2006 • RDP documents—click this link: http://www.anc.org.za/rdp/index.html • ASGISA document: http://www.info.gov.za/speeches/briefings/asgibackground.pdf • For GEAR document: http://www.info.gov.za/otherdocs/1996/gear.pdf